Startups should think about how their product contributes to the well-being of their customer, not just for the good of society, but for the good of their bottom lines, according to the Shared Value Project’s Mark Kramer.
The Shared Value Project advocates a new way of thinking about the role of business in society, encouraging business to find opportunity in solving social problems in ways that contribute to their profitability and growth.
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Kramer says startups should build their products so they contribute to, and incentivise, the well-being of their consumers. They should be targeting markets that are being underserved and attempt to solve some of the social problems that foundations, development agencies and governments are grappling with.
“Shared Value is really about competitive strategy. It’s not just adding on something nice for the sake of being a good citizen, or adding a marketing pitch to what you do,” he says.
“It’s really about differentiating your company by finding a competitive advantage in creating benefit for your customers.”
Kramer gives the example of South African insurance company Discovery Health. To encourage its members to live healthier, it immediately reimburses them 25% of whatever they spend at the supermarket on fresh fruit and vegetables. It also pays their gym club membership, provided they go to the gym twice a week.
“They started with a very simple idea of using behavioural economics, financial incentives to encourage healthier behaviour on behalf of their members,” he says.
“Using a whole range of incentives, they found that over a decade or more their members had a higher life expectancy, six years longer than the average. Got sick less often, recover quicker and have about 14% lower medical costs.”
The company also encourages members to wear Fitbits, so it can track their healthy behaviour and offer rebates and adjustments for their insurance premiums based on that behaviour. For auto insurance if offers members the chance to install a device that tracks driver behaviour, using that data it judges how safely members are driving and reimburses up to half of their petrol bill every month.
“Their population has half the number of traffic fatalities, which of course saves them money not only on auto insurance but health insurance.
“So it’s not CSR (corporate social responsibility) it’s not philanthropy. It’s really looking at many things businesses saw as externalities, social problems outside their purview, and finding that business can actually tackle and make a meaningful difference on those problems, in ways that contribute to their bottom line.”